Tempe, Arizona - Economic activity in the manufacturing sector expanded in January for the 18th consecutive month, and the overall economy grew for the 20th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business.

The report was issued today by Norbert J. Ore, CPSM, C.P.M., chair of the Institute for Supply Management Manufacturing Business Survey Committee. "The manufacturing sector grew at a faster rate in January as the PMI registered 60.8 percent, which is its highest level since May 2004 when the index registered 61.4 percent. The continuing strong performance is highlighted as January is also the sixth consecutive month of month-over-month growth in the sector. New orders and production continue to be strong, and employment rose above 60 percent for the first time since May 2004. Global demand is driving commodity prices higher, particularly for energy, metals and chemicals."

Performance By Industry

Of the 18 manufacturing industries, 14 are reporting growth in January, in the following order: Petroleum & Coal Products; Primary Metals; Apparel, Leather & Allied Products; Wood Products; Computer & Electronic Products; Transportation Equipment; Fabricated Metal Products; Machinery; Paper Products; Miscellaneous Manufacturing; Chemical Products; Furniture & Related Products; Food, Beverage & Tobacco Products; and Electrical Equipment, Appliances & Components. The four industries reporting contraction in January are: Textile Mills; Printing & Related Support Activities; Plastics & Rubber Products; and Nonmetallic Mineral Products.

What Respondents Are Saying ...

- "Continued weakness in the dollar is having a negative effect on the components we purchase overseas and increasing our material costs." (Transportation Equipment)
- "Lead times are increasing significantly, and commodity pricing is starting to increase." (Chemical Products)
- "January/February sales will be decent, and we see a strong March. We're cautiously optimistic but reluctant to hire." (Fabricated Metal Products)
- "Business is still slow with no pick-up in sight." (Furniture & Related Products)
- "We continue to see unexpected strength in many non-U.S. markets." (Fabricated Metal Products)

Manufacturing At A Glance
January 2011

Commodities Reported Up/Down In Price And In Short Supply
Commodities Up in Price

Aluminum (5); Aluminum Products; Brass (2); Brass Products; Caustic Soda (6); Chemicals (4); Copper (6); Copper Based Products (3); Corn (5); Corrugated Containers (11); Diesel (2); Freight Rates; Fuel Oils; High Density Polyethylene (2); Lubricants; Nuts; Packaging Materials; PET (2); Plastics; Plastic Products; Plastic Resins (3); Polyethylene Resin; Polypropylene; Soybean Oil (3); Stainless Steel (3); Stainless Steel Products; Steel (5); Steel Products (2); Steel Surcharges; and Sugar.

Commodities Down in Price

No commodities are reported down in price.

Commodities in Short Supply

Electric Components is the only commodity reported in short supply.

Note: The number of consecutive months the commodity is listed is indicated after each item.

January 2011 Manufacturing Index Summaries

PMI

Manufacturing continued to grow in January as the PMI registered 60.8 percent, an increase of 2.3 percentage points when compared to December's seasonally adjusted reading of 58.5 percent. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.

A PMI in excess of 42.5 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the PMI indicates growth for the 20th consecutive month in the overall economy, as well as expansion in the manufacturing sector for the 18th consecutive month. Ore stated, "The past relationship between the PMI and the overall economy indicates that the PMI for January (60.8 percent) corresponds to a 6.4 percent increase in real gross domestic product (GDP) on an annual basis."

New Orders

ISM's New Orders Index registered 67.8 percent in January, which is an increase of 5.8 percentage points when compared to the seasonally adjusted 62 percent reported in December. This is the 19th consecutive month of growth in the New Orders Index. A New Orders Index above 52.1 percent, over time, is generally consistent with an increase in the Census Bureau's series on manufacturing orders (in constant 2000 dollars).

The 12 industries reporting growth in new orders in January - listed in order - are: Petroleum & Coal Products; Primary Metals; Computer & Electronic Products; Transportation Equipment; Wood Products; Machinery; Fabricated Metal Products; Miscellaneous Manufacturing; Chemical Products; Paper Products; Electrical Equipment, Appliances & Components; and Food, Beverage & Tobacco Products. The three industries reporting decreases in new orders in January are: Textile Mills; Plastics & Rubber Products; and Nonmetallic Mineral Products.

Production

ISM's Production Index registered 63.5 percent in January, which is an increase of 0.5 percentage point from the December reading of 63 percent (seasonally adjusted). An index above 51 percent, over time, is generally consistent with an increase in the Federal Reserve Board's Industrial Production figures. This is the 20th consecutive month the Production Index has registered above 50 percent.

The 13 industries reporting growth in production during the month of January - listed in order - are: Petroleum & Coal Products; Computer & Electronic Products; Apparel, Leather & Allied Products; Wood Products; Primary Metals; Transportation Equipment; Miscellaneous Manufacturing; Fabricated Metal Products; Chemical Products; Food, Beverage & Tobacco Products; Paper Products; Electrical Equipment, Appliances & Components; and Machinery. The three industries reporting a decrease in production in January are: Textile Mills; Nonmetallic Mineral Products; and Plastics & Rubber Products.

Employment

ISM's Employment Index registered 61.7 percent in January, which is 2.8 percentage points higher than the seasonally adjusted 58.9 percent reported in December. This is the 16th consecutive month of growth in manufacturing employment. An Employment Index above 50.1 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.

Of the 18 manufacturing industries, 11 reported growth in employment in January in the following order: Apparel, Leather & Allied Products; Wood Products; Petroleum & Coal Products; Primary Metals; Miscellaneous Manufacturing; Computer & Electronic Products; Nonmetallic Mineral Products; Fabricated Metal Products; Transportation Equipment; Machinery; and Food, Beverage & Tobacco Products. The two industries reporting a decrease in employment during January are: Chemical Products and Paper Products.

Supplier Deliveries

The delivery performance of suppliers to manufacturing organizations was slower in January as the Supplier Deliveries Index registered 58.6 percent, which is 1.9 percentage points higher than the 56.7 percent registered in December (seasonally adjusted). This is the 20th consecutive month the Supplier Deliveries Index has been above 50 percent. A reading above 50 percent indicates slower deliveries.

The eight industries reporting slower supplier deliveries in January - listed in order - are: Primary Metals; Furniture & Related Products; Machinery; Fabricated Metal Products; Transportation Equipment; Paper Products; Chemical Products; and Electrical Equipment, Appliances & Components. The three industries reporting faster deliveries in January are: Printing & Related Support Activities; Computer & Electronic Products; and Food, Beverage & Tobacco Products.

Inventories

Manufacturers' inventories grew for the seventh consecutive month in January, and at a slightly faster rate as the Inventories Index registered 52.4 percent. The index is 0.6 percentage point higher than the seasonally adjusted 51.8 percent reported in December. An Inventories Index greater than 42.7 percent, over time, is generally consistent with expansion in the Bureau of Economic Analysis' (BEA) figures on overall manufacturing inventories (in chained 2000 dollars).

The nine industries reporting higher inventories in January - listed in order - are: Textile Mills; Apparel, Leather & Allied Products; Paper Products; Plastics & Rubber Products; Nonmetallic Mineral Products; Machinery; Chemical Products; Computer & Electronic Products; and Fabricated Metal Products. The seven industries reporting decreases in inventories in January - listed in order - are: Primary Metals; Petroleum & Coal Products; Printing & Related Support Activities; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; and Transportation Equipment.

Customers' Inventories*

The ISM Customers' Inventories Index registered 45.5 percent in January, 5.5 percentage points higher than in December when the index registered 40 percent. This is the 22nd consecutive month the Customers' Inventories Index has been below 50 percent, indicating that respondents believe their customers' inventories are too low at this time.

The three manufacturing industries reporting customers' inventories as being too high during January are: Textile Mills; Apparel, Leather & Allied Products; and Food, Beverage & Tobacco Products. The eight industries reporting customers' inventories as too low during January - listed in order - are: Nonmetallic Mineral Products; Plastics & Rubber Products; Printing & Related Support Activities; Transportation Equipment; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Machinery; and Chemical Products.

Prices*

The ISM Prices Index registered 81.5 percent in January, 9 percentage points higher than the 72.5 percent reported in December and the highest reading since July 2008. This is the 19th consecutive month the Prices Index has registered above 50 percent. While 64 percent of respondents reported paying higher prices and 1 percent reported paying lower prices, 35 percent of supply executives reported paying the same prices as in December. A Prices Index above 49.4 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) Index of Manufacturers Prices.

The 16 industries reporting paying increased prices during the month of January - listed in order - are: Textile Mills; Plastics & Rubber Products; Primary Metals; Food, Beverage & Tobacco Products; Fabricated Metal Products; Nonmetallic Mineral Products; Paper Products; Machinery; Transportation Equipment; Miscellaneous Manufacturing; Chemical Products; Electrical Equipment, Appliances & Components; Apparel, Leather & Allied Products; Wood Products; Printing & Related Support Activities; and Computer & Electronic Products. Furniture & Related Products is the only manufacturing industry reporting paying lower prices on average during January.

Backlog of Orders*

ISM's Backlog of Orders Index registered 58 percent in January, which is 11 percentage points higher than the 47 percent reported in December. Of the 83 percent of respondents who reported their backlog of orders, 34 percent reported greater backlogs, 18 percent reported smaller backlogs, and 48 percent reported no change from December.

The 10 industries reporting increased order backlogs in January - listed in order - are: Primary Metals; Apparel, Leather & Allied Products; Computer & Electronic Products; Machinery; Paper Products; Printing & Related Support Activities; Plastics & Rubber Products; Transportation Equipment; Fabricated Metal Products; and Chemical Products. The four industries reporting decreases in order backlogs during January are: Miscellaneous Manufacturing; Nonmetallic Mineral Products; Food, Beverage & Tobacco Products; and Electrical Equipment, Appliances & Components.

New Export Orders*

ISM's New Export Orders Index registered 62 percent in January, which is 7.5 percentage points higher than the 54.5 percent reported in December. This is the 19th consecutive month of growth in the New Export Orders Index.

The 11 industries reporting growth in new export orders in January - listed in order - are: Petroleum & Coal Products; Primary Metals; Apparel, Leather & Allied Products; Computer & Electronic Products; Machinery; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Transportation Equipment; Chemical Products; Food, Beverage & Tobacco Products; and Miscellaneous Manufacturing. The two manufacturing industries reporting a decrease in export orders during January are: Nonmetallic Mineral Products; and Plastics & Rubber Products.

Imports*

Imports of materials by manufacturers continued to expand in January as the Imports Index registered 55 percent, which is 4.5 percentage points higher than the 50.5 percent reported in December. This is the 17th consecutive month of growth in imports.

The 10 industries reporting growth in imports during the month of January - listed in order - are: Wood Products; Primary Metals; Apparel, Leather & Allied Products; Printing & Related Support Activities; Paper Products; Fabricated Metal Products; Food, Beverage & Tobacco Products; Chemical Products; Transportation Equipment; and Machinery. The four industries reporting a decrease in imports during January are: Petroleum & Coal Products; Computer & Electronic Products; Miscellaneous Manufacturing; and Nonmetallic Mineral Products.

* The Backlog of Orders, Prices, Customers' Inventories, Imports and New Export Orders Indexes do not meet the accepted criteria for seasonal adjustments.
Buying Policy

Average commitment lead time for Capital Expenditures remained unchanged at 105 days. Average lead time for Production Materials increased 5 days to 57 days. Average lead time for Maintenance, Repair and Operating (MRO) Supplies decreased 1 day to 27 days.